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Balbir Singh v. The Collector Of Central Excise & Land Customs, New Delhi And Another

Punjab & Haryana High Court
Mar 18, 1960
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Judgment Summary — Dua, J. (with Bishan Narain, J. agreeing)

Factual and Procedural Background

The petitioner was arrested on 29 September 1957 after 38 tolas and 1½ rattis of gold (four bars) were recovered from his possession. He was tried and convicted under section 167(8) of the Sea Customs Act and sentenced to one year rigorous imprisonment; a revision against that conviction was pending in the High Court.

On 8 March 1958 the Customs authorities served a show-cause notice seeking confiscation of the recovered gold and further penal action under the Sea Customs Act, specifically referring to section 178-A. The Collector confiscated the gold and, on 30 August 1958, imposed a penalty of Rs. 3,000/-. The petitioner appealed to the Central Board of Revenue but did not deposit the penalty as required under section 189; his appeal was rejected on 13 May 1959 for non-compliance. The petitioner filed the present writ petition on 24 August 1959.

Two questions were identified for decision: (1) the vires of section 178-A of the Sea Customs Act (the challenge confined to Articles 19(1)(f) and 19(1)(g) of the Constitution), and (2) the construction of section 167(8) of the Sea Customs Act as it relates to imposition of penalty.

Legal Issues Presented

  1. Whether section 178-A(1) of the Sea Customs Act is violative of Article 19(1)(f) and Article 19(1)(g) of the Constitution by casting an onus on the person from whom gold is seized to prove it is not smuggled-gold (i.e., whether that evidentiary rule constitutes an unreasonable restriction on the rights to acquire/hold property and to carry on trade or business).
  2. Whether under section 167(8) of the Sea Customs Act a penalty can be validly imposed on a person where there is no finding that the person was concerned in the importation or exportation of prohibited or restricted goods (i.e., whether the Collector's imposition of Rs. 3,000/- in the present case is sustainable on the record).

Arguments of the Parties

Petitioner's Arguments (as presented by Mr. Sibal)

  • Section 178-A vests arbitrary and uncontrolled powers in Customs officers to form a subjective belief that gold in a person's possession is smuggled, permitting seizure.
  • Thereafter an onus is placed on the person from whom the gold is seized to prove it is not smuggled-gold; this onus is alleged to be impossible to discharge and therefore unreasonable.
  • Because the burden is so onerous, the provision places an unreasonable restriction on citizens' rights under Article 19(1)(f) (acquire and hold property) and Article 19(1)(g) (carry on any trade or business).
  • There is no rational nexus between the legislative object (preventing gold smuggling) and the restrictive evidentiary rule; reliance was placed on Nathella Sampathu Chetty v. Collector of Customs (Madras, A.I.R. 1959 Mad. 142) and an unreported Bombay Single Judge decision (Desai J.) holding s.178-A(1) unconstitutional.

The opinion does not contain a detailed adversarial presentation of the respondent/State counsel's specific arguments in this text; instead the Court considered prior decisions and the legislative purpose in reaching its conclusions.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Babulal Amthalal Mehta v. Collector of Customs, Calcutta (A.I.R. 1957 S.C. 877) Held that section 178-A is not violative of Article 14. The Court noted that it was conceded s.178-A had been held not violative of Article 14 by the Supreme Court, situating the present attack as confined to Article 19(1)(f) and (g).
Nathella Sampathu Chetty v. Collector of Customs, Madras (A.I.R. 1959 Mad. 142) Division Bench held section 178-A(1) unconstitutional as infringing Article 19(1)(f) and 19(1)(g). The petitioner relied on this decision; the Court considered it but contrasted it with other High Court decisions that reached the opposite conclusion and ultimately did not follow Nathella Sampathu Chetty in this case.
Unreported — Desai J., Bombay High Court (Misc. Application No. 21 of 1957) Single Judge decision supporting the contention that s.178-A(1) is unconstitutional under Articles 19(1)(f) and (g). The Court observed this decision had been approved by the Madras Division Bench but noted it had been dissented from by a later Bombay Division Bench; the unreported decision was treated as part of the conflicting authorities.
Pukhraj Jain v. D.R. Kohli, Collector of Central Excise (S.C.A. 3 of 1958 — Bombay Division Bench) Division Bench disagreed with the single judge and upheld the constitutionality of section 178-A, finding the evidentiary burden not unreasonable under Article 19(1)(f) and (g). The Court relied on the reasoning in Pukhraj Jain as supporting the constitutionality of s.178-A, emphasizing the legislative purpose of combating extensive gold-smuggling.
The State of Punjab v. Krishan Lal (1959 61 P.L.R. 937) Division Bench repelled the contention that section 178-A violates Article 19(1)(f) and (g). The Court regarded this High Court bench decision as persuasive and consistent with upholding s.178-A against Art.19 challenges in the present case.
Gian Chand v. State of Punjab (Cr. Revision No. 1566 of 1958 — unreported; Division Bench G.D. Khosla C.J. and Bedi J.) Held that Articles 19(1)(f) and (g) are not infringed by s.178-A(1); drew an analogy to the Prevention of Corruption Act to find a nexus between object and restriction. The Court relied on this unreported Division Bench decision as supporting the view that a rational nexus exists between the objective of preventing smuggling and the evidentiary onus placed by s.178-A(1).
F.N. Ray v. Collector of Customs, Calcutta (1957 S.C.R. 1151 at p. 1158) Referenced in relation to the question whether penalty under the statute can exceed Rs. 1,000. The Court noted counsel relied on certain observations in this Supreme Court judgment in arguing about the maximum permissible penalty, but the Court observed it was unnecessary to decide that question given its finding on the absence of a requisite finding to support any penalty.

Court's Reasoning and Analysis

The Court proceeded in two parts corresponding to the two issues identified.

On the constitutional challenge to section 178-A(1) under Article 19(1)(f) & (g):

  1. The Court recognized that the reasonableness of restrictions on fundamental rights is justiciable and must be tested by an objective standard—“the average prudent man”—rather than by the perspective of the person affected.
  2. The Court summarized the multi-factorial test to determine reasonableness: the nature of the right affected, the underlying purpose of the restriction, the enormity/extent/urgency of the evil sought to be controlled, prevailing circumstances at the relevant time, the manner and proportionality of the restriction, and whether the restriction is dictated by reason and not arbitrary whim.
  3. Applying those tests and taking into account Parliament’s object in enacting s.178-A (to check a large-scale evil of gold smuggling that adversely affected the national economy), the Court found a rational nexus between that objective and the rule of evidence which places onus on a person in possession of gold seized after a public officer reasonably believes it to be smuggled.
  4. The Court acknowledged the burden on the person to prove the gold is not smuggled is heavy, but held that given the severity of the economic threat the Legislature sought to meet, the burden could not be considered unreasonable under established canons of statutory construction and the reasonableness tests articulated.
  5. Consequently, the Court rejected the petitioner’s contention that s.178-A(1) violated Article 19(1)(f) and (g).

On construction of section 167(8) and the imposition of penalty:

  1. The Court construed section 167(8) to mean that a penalty can be imposed only if the person has been concerned in the offence of importation or exportation of goods which are at the time prohibited or restricted.
  2. In the present case the Court found there was no finding on the record that the petitioner had been concerned in such an offence.
  3. Therefore, the Collector’s order imposing a penalty of Rs. 3,000/- could not be sustained on the available findings.
  4. The Court explicitly noted that, because it quashed the penalty order for lack of requisite finding, it was unnecessary to decide the separate contention urged by counsel as to whether the statute permits a penalty exceeding Rs. 1,000/- (counsel relied on F.N. Ray and an unreported Division Bench decision for that point).

Holding and Implications

Holding: Petition partly allowed.

- The Court held that section 178-A(1) of the Sea Customs Act is not violative of Article 19(1)(f) and Article 19(1)(g) and therefore the order of confiscation of the gold is valid and unassailable; the writ petition insofar as it challenged confiscation was dismissed.

- The Court held that the order imposing a penalty of Rs. 3,000/- under section 167(8) could not be sustained because there was no finding that the petitioner had been concerned in the offence of importation or exportation of prohibited or restricted goods; the penalty order was quashed as it was severable from the confiscation order.

- The Court did not express a considered opinion on the separate question whether the statutory penalty could exceed Rs. 1,000/-, deeming that question unnecessary to decide in view of its disposal on the ground of absence of the requisite finding.

- As to costs, the Court ordered that there would be no order as to costs.

Disposition

The writ petition was allowed in part: the penalty order (severable) was quashed; the confiscation order was upheld; the petition was dismissed insofar as it related to confiscation. Bishan Narain, J. agreed with the judgment.

Show all summary ...

Dua, J.:— In this writ petition only two points fall for decision. The first one relates to the vires of section 178-A of the Sea Customs Act, though the attack is only confined to Article 19(1)(f) and (g) of the Constitution. It is conceded that this section has been held by the Supreme Court not to be violative of article 14: vide Babulal Amthalal Mehta v. Collector of Customs, Calcutta . A.I.R 1957 S.C 877.. The second point relates to the construction of section 167(8) of the Sea Customs Act.

2. The facts do not seem to be disputed and it is common ground that the petitioner was arrested on 29th of September 1957 and 38 tolas and 1½ rattis of gold, consisting of four bars, was recovered from his possession. He was tried and convicted of an offence under section 167(8) of the Sea Customs Act and sentenced to one year's rigorous imprisonment. A revision against the order of the learned Additional Sessions Judge, Amritsar, with respect to this conviction, is pending in this Court.

3. On 8th of March 1958 the Customs authorities sent a notice to the petitioner to show cause as to why the gold recovered from his possession be not confiscated and why further penal action be not taken against him under the provisions of the Sea Customs Act. The petitioner's attention was specifically drawn to section 178-A of the above Act. The Collector seems to have ultimately confiscated the gold recovered from the petitioner's possession and also to have imposed a penalty to the extent of Rs. 3,000/- on 30th of August 1958. The petitioner preferred an appeal to the Central Board of Revenue, but he was called upon to deposit the amount of penalty, failing which his appeal was liable to be dismissed for non-compliance with the provisions of section 189 of the Sea Customs Act. The petitioner objected to this course and expressed his inability to deposit the penalty, with the result that on 13th of May 1959 the Central Board of Revenue rejected his appeal on the ground of non-compliance with the provisions of section 189 of the Sea Customs Act. On 24th of August 1959 the present writ petition was filed in this Court and, as already noticed, vires of section 178-A of the Sea Customs Act have been assailed on the ground that its provisions are violative of clauses (f) and (g) of article 19(1) of the Constitution.

4. Mr. Sibal has emphatically contended that arbitrary and uncontrolled powers have been given to Customs Officers to form subjective belief about the gold, found in the possession of any person, to be smuggled-gold and to seize it, and the impossible onus is thereafter cast upon the person, from whom the gold has been so seized, to prove that it is not smuggled-gold. The counsel's attack is two-fold. In the first instance he has submitted that this onus is impossible to discharge and, therefore, this provision places unreasonable restriction in the way of citizens “to acquire and hold property” and also “to carry on any trade or business”. Secondly he has contended that there is no rational nexus between the object to be achieved by enacting this provision of law and the restriction imposed. He has sought support for his contention from Nathella Sampathu Chetty v. Collector of Customs, Madras . A.I.R 1959 Mad. 142. where a Division bench of the Madras Court have held that section 178-A(1) of the Sea Customs Act constitutes an unconstitutional infringement of the fundamental right secured to citizens by Article 19(1)(f) and 19(1)(g) of the Constitution and is, therefore, void under Article 13. Reliance in this connection has also been placed on an unreported decision of the Bombay High Court by a learned Single Judge, Desai J., in Miscellaneous Application No. 21 of 1957. These decisions, of course, support the contention of the petitioner, in as much as it is laid down in them that there is no reasonable or rational connection between the fact to be proved and the presumption to follow under section 178-A(1). The learned Judges also seem to have been influenced by the severity of the burden imposed by the legislature on the person in possession of the gold which is seized and indeed they proceed to observe that this severity defeats the achievement of the purpose the legislature had in view. With this argument I shall deal a little later.

5. I may, however, note, at this stage, that the decision of Desai J. in the unreported case, which has been approved by the Madras High Court in the reported case, has recently been dissented firm by a Division Bench of the Bombay High Court (Tambe and Badka JJ.) in another unreported case Pukhraj Jain v. D.R Kohli, Collector of Central Excise, etc. . S.C.A 3 of 1958. (Special Civil Application No. 3 of 1958, decided on 20th of March, 1959). The Division Bench of the Bombay High Court in Pukhraj Jain's case have dealt with the question of reasonable restriction under Article 19(1)(f) and (g) in a fairly exhaustive judgment and have come to the conclusion that the restriction imposed, in the shape of rule of evidence, casting a burden of proof on the person from whose possession the gold is seized, that, it was not smuggled, cannot, in the circumstances in which this provision has been enacted, be considered to be unreasonable. The learned Judges noticed that section 178-A was, for the first time, brought on the Statute Book, in the year 1955, in order to remedy the evil of gold-smuggling which was going on at a very extensive scale and had indeed increased in such dangerous proportions that it was seriously affecting the economy of the country adversely. The decision of the Madras High Court in Nathella Sampathu Chetty's case was also cited before the learned Judges, but they nevertheless upheld the constitutionality of section 178-A of the Sea Customs Act.

6. This question has also come up for decision in our own High Court and in The State Of Punjab… v. Krishan Lal…. . 1959 61 P.L.R 937. a Division Bench of this Court repelled the contention that this section violates Article 19(1)(f) and 19(1)(g) of the Constitution. But then the learned counsel has contended that the Division Bench deciding Krishan Lal's case did not consider the matter at any great length, but merely because an attack based on Article 19(1)(f) and (g) had not been persisted in, by the counsel of the eminence of Mr. N.C Chatterjee, before the Supreme Court, in Babulal Amthalal Mehta's case, the attack based on Article 19(1)(f) and (g) was considered to be without merit. In my opinion it is perfectly legitimate to observe, as was done by G.D Khosla J. (as he then was) in the reported case, that if there was any real merit in the contention based on Article 19(1)(f) and (g), the counsel of the eminence of Mr. N.C Chatterjee would apparently not have abstained from pressing the point seriously. But this apart, in a later unreported judgment of this Court in Gian Chand v. State of Punjab . Cr. Revision No. 1566 of 1958. (Criminal Revision No. 1566 of 1958), by a Division Bench (G.D Khosla C.J and Bedi J.) it has again been laid down in unambiguous terms, that Article 19(1)(f) and (g) has not been infringed by enacting section 178-A(1) of the Sea Customs Act. In this case reference has, by way of analogy, been made to the Prevention of Corruption Act and the Division Bench has in positive language laid down that there does exist a nexus between the objective of the Act and the restriction imposed.

7. Nothing said at the Bar has convinced us to doubt the correctness of the view taken in the two Bench decisions of this Court mentioned above. As a matter of fact, keeping in view the object sought to be achieved by the Parliament and the provisions of section 178-A(1) of the Sea Customs Act, by which, as a matter of evidence, onus has been placed on the persons, from whom the goods have been seized, in the belief, that they are smuggled goods, it is difficult to hold that there is no rational nexus between the two. The argument that the onus is difficult to discharge is in my opinion hardly relevant.

8. It is true that the question of reasonableness of the restrictions imposed on the fundamental rights guaranteed by the Constitution is justiciable and this Court is fully competent to consider and adjudicate upon it. It is also well settled that while considering the reasonableness of the restrictions the Court has to apply the objective standard—the standard of the average prudent man. It is according to this external yardstick that the reasonableness has to be tested, keeping proper balance between the freedom guaranteed and the social control permitted. It must at the same time be borne in mind that there is no abstract standard or general pattern of reasonableness applicable to all eases, nor is it permissible to the Court to proceed on a consideration of what is reasonable from the point of view of the persons on whom the restriction is imposed. In each case the Court is called upon to consider the nature of the right alleged to have been infringed, the true underlying purpose of the restriction imposed, the enormity, the extent and the gravity or the urgency of the evil intended to be controlled, the circumstances and the conditions prevailing at the relevant time, the manner of the imposition and the disproportion of the restriction imposed. The restriction should, of course, not go beyond what is required in the interests of the general public and it must have a rational relation to the object which the legislature seeks to achieve. It has to be guided by intelligent care and deliberation and should be dictated by reason, and not by arbitrary whim, and must not invade the fundamental right excessively. Keeping these tests in view, if it is reasonably possible to uphold the restriction, then this Court would not go into the question and consider the wisdom of the legislative policy, because the legislature is the best judge of what is good for the community by whose suffrage it comes into existence. It is only the validity of the law which has to be ultimately determined by the Court.

9. In the light of what has been stated above, I am inclined to take the view that in order to achieve the underlying object or purpose of stepping or even impairing the evil of gold-smuggling it must be considered to be reasonable to enact a rule of evidence that if a public officer in the discharge of his official duty entertains a reasonable belief that the gold in the possession of a person is smuggled-gold, then it would be for that person to prove that it is not smuggled-gold. It is no doubt not a light burden of proof, but when the economy of the nation is at stake, such a burden of proof cannot, according to the well recognised canons of statutory construction and the tests of reasonableness stated above, be considered to be unreasonable. The impugned provisions are by no means too drastic or unnecessarily harsh and they do not in my opinion override the object to achieve which the legislative measure in question has been enacted. The rational nexus between the object to be achieved and the rule of evidence enacted is fairly obvious. I would, therefore, repel the contention that the impugned section is violative of Article 19(1)(f) and (g) of the Constitution.

10. This brings me to the second contention, and this in my opinion must prevail. It has been contended that under section 167(8) of the Sea Customs Act the penalty can only be imposed if the person has been concerned in the offence of importation or exportation of goods which are for the time being prohibited or restricted. In the present case it is not denied that there is no such finding on the record. If that be the position, then the order imposing penalty of Rs. 3,000/- cannot be sustained. In this view of the matter, it is hardly necessary for us to go into the question whether the penalty under this provision of law can or cannot exceed Rs. 1,000/-. The counsel for the petitioner has in support of the last contention also placed reliance on some observations in a judgment of the Supreme Court in F.N Ray v. Collector of Customs, Calcutta . 1957 S.C.R 1151 at p. 1158. and indeed the unreported decision of a Division Bench of this Court in Gian Chand's case also lends support to the contention advanced by the counsel, but in view of the fact that on the findings of the Collector no penalty can at all be imposed, it is not necessary for us to express any considered opinion on this question.

11. For the reasons given above this writ petition is allowed in part and the order imposing penalty, which is clearly severable from the other part, is quashed, but the order confiscating the geld is perfectly valid and unassailable, and the writ petition with respect to this part of the order is dismissed.

12. In the circumstances of the case there will be no order as to costs.

Bishan Narain, J.:—I agree.

Petition partly allowed.